Breaking News Energy News — 17 June 2014

Cape Metro requests tariff hike above Nersa guideline.

PRETORIA – Residents of Cape Town need to pay more for electricity to compensate for decreased sales as high-end domestic customers switch to renewable energy – with full support of the city council.

This was the argument put forward during public hearings held by the National Energy Regulator (Nersa) about municipal applications for electricity tariff increases that exceed the guideline of 7.39%. Cape Town applied for an increase of 7.63%. Tariff increases at all municipalities take effect on 1 July.

Leslie Recontre, Cape Town director of electrical services told the hearing that while commercial sales were increasing there was a significant decline in sales to high-end domestic customers. He said it was in reaction to high tariffs and the installation of solar geysers, encouraged by the council, and other forms of renewable energy.

Due to the lower volumes of energy that these customers now consume, the City now earns the bulk of its electricity revenues from categories of users who pay lower rates. This hurt the city’s pockets.

Recontre said the decline is expected to continue. He said the City will address it by the reintroduction from next year of a service charge to cover operational costs. The indigent policy will also be amended to ensure that non-indigents don’t access those tariffs. The current policy is only based on volume of consumption with a limit of 450 units, but an additional qualification will be added linked to the value of the property.

He said many people will be affected by this change to the indigent policy and the changes will be introduced over a couple of years to soften the impact.

Recontre said that while sales declined, electricity demand remained unchanged. Distribution losses increased and the City doubled its protection teams in an effort to detect losses on prepaid meters.

Thembani Bukula, Nersa regulator member for electricity asked why the City reacts to a drop in sales with higher tariffs rather than cost reductions.

Recontre said the increase in operating costs was limited to just above CPI and there is a sharp focus on further reductions. The degree to which electricity revenue is used to subsidise other services has however increased, capital charges have increased sharply, as did connection fees to Eskom.

Bukula warned that tariffs will continue to rise unless the City of Cape Town lowers its costs.

Nersa will make its determination in the next two weeks.

Source: Moneyweb


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